President Donald Trump announced a bipartisan deal to suspend the U.S. debt ceiling and boost spending levels for two years, capping weeks of frenzied negotiations that avert the risk of a damaging payments default.
Congressional leaders pledged to support the bipartisan compromise that left all sides unsatisfied but focusing on the provisions they could count as a win.
“I am pleased to announce that a deal has been struck with Senate Majority Leader Mitch McConnell, Senate Minority Leader Chuck Schumer, Speaker of the House Nancy Pelosi, and House Minority Leader Kevin McCarthy – on a two-year Budget and Debt Ceiling, with no poison pills,” Trump said on Twitter. “This was a real compromise in order to give another big victory to our Great Military and Vets!”
The House has to approve the budget bill this week before members leave July 26 for a six-week recess. The Senate can put it to a vote as late as next week. The White House, in a statement on Monday night, said “both House and the Senate should quickly move this deal to the president’s desk for signature.”
Earlier, Pelosi and Schumer said in a joint statement that “Today, a bipartisan agreement has been reached that will enhance our national security and invest in middle class priorities that advance the health, financial security and well-being of the American people.” McConnell said in a statement he backs the deal and plans to hold a vote before the August recess.
The broad agreement, finalized after weeks of negotiations between Pelosi and Treasury Secretary Steven Mnuchin, would suspend the debt ceiling until July 31, 2021, eliminating the risk that the government could miss payments as early as September. It would also cancel automatic cuts that would have reduced domestic spending by $55 billion and military spending by $71 billion compared with 2019 levels.
Under the terms of the agreement, the budget cap for discretionary spending will rise to $1.37 trillion in 2020 and $1.375 trillion in 2021 — which doesn’t include the cost of programs like Medicare, Medicaid and Social Security that are automatically funded, according to a person familiar with the deal. That’s an increase from $1.321 trillion this year.
Republicans were pushing for more defense spending and managed to secure $738 billion in 2020 and $741 billion in 2021, including funds for overseas operations that aren’t subject to budget caps. Democrats secured $632 billion in 2020 and $635 billion in 2021 for domestic spending.
The details pic.twitter.com/bClMtSIJcV
— Erik Wasson (@elwasson) July 22, 2019
Democrats also won an extra $2.5 billion in 2020 above the spending cap for carrying out the 2020 census.
The overall $320 billion boost in spending over two years is $30 billion less than Democrats sought. Trump would get only about half of the $150 billion in savings his administration sought.
With the new spending and limited savings, the deal will likely push the annual budget deficit over $1 trillion next year.
The deal could still hit snags in Congress as members of both parties analyze the compromise. House conservatives have largely criticized the deal, and progressive Democrats had demanded higher spending levels.
Even if the deal is signed into law, the risk of a government shutdown on Oct. 1 remains. Congress must still pass spending bills adhering to the spending caps to fund the government in the new fiscal year. A fight over border wall funding led to the longest government shutdown in modern history that ended early this year.
The Treasury Department has been using so-called extraordinary measures to meet debt obligations since March 2, when the U.S. reached its $22 trillion limit on borrowing. Under one of the Treasury Department’s most conservative estimates, the U.S. would have risked defaulting before lawmakers are scheduled to return from their recess on Sept. 9.
A default on interest payments or federal salaries would have severe economic ramifications, shaking confidence in the U.S. government sending shock waves through global markets.